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WHAT IS A NPA (NON PERFORMING
ASSET)
Action for enforcement of security interest can be initiated only
if the secured asset is classified as Non Performing Asset.
Non Performing Asset means an asset or account of borrower, which
has been classified by a bank or financial institution as sub-standard,
doubtful or loss asset, in accordance with the directions or guidelines
relating to asset classification issued by RBI.
An amount due under any credit facility is treated as "past
due" when it has not been paid within 30 days from the due
date. Due to the improvement in the payment and settlement systems,
recovery climate, upgradation of technology in the banking system,
etc., it was decided to dispense with 'past due' concept, with effect
from March 31, 2001. Accordingly, as from that date, a Non performing
asset (NPA) shell be an advance where
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interest and /or installment of principal remain overdue for
a period of more than 180 days in respect of a Term Loan,
-
the account remains 'out of order' for a period of more than
180 days, in respect of an overdraft/ cash Credit(OD/CC),
-
the bill remains overdue for a period of more than 180 days
in the case of bills purchased and discounted,
-
interest and/ or installment of principal remains overdue
for two harvest seasons but for a period not exceeding two half
years in the case of an advance granted for agricultural purpose,
and
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any amount to be received remains overdue for a period of more
than 180 days in respect of other accounts.
With a view to moving towards international best practices and
to ensure greater transparency, it has been decided to adopt the
'90 days overdue' norm for identification of NPAs, form the year
ending March 31, 2004. Accordingly, with effect form March 31, 2004,
a non-performing asset (NPA) shell be a loan or an advance where;
-
interest and /or installment of principal remain overdue for
a period of more than 90 days in respect of a Term Loan,
-
the account remains 'out of order' for a period of more than
90 days, inrespect of an overdraft/ cash Credit(OD/CC),
-
the bill remains overdue for a period of more than 90 days
in the case of bills purchased and discounted,
-
interest and/ or installment of principal remains overdue
for two harvest seasons but for a period not exceeding two half
years in the case of an advance granted for agricultural purpose,
and
-
any amount to be received remains overdue for a period of
more than 90 days in respect of other accounts.
'Out of order'
An account should be treated as 'out of order' if the outstanding
balance remains continuously in excess of the sanctioned limit/
drawing power. In case where the outstanding balance in the principal
operating account is less than the sanctioned limit/ drawing power,
but there are no credits continuously for six months as on the date
of balance sheet or credits are not enough to cover the interest
debited during the same period, these account should be treated
as 'out of order'.
Overdue
Any amount due to the bank under any credit facility is 'overdue'
if it is not paid on the due date fixed by the bank.
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